Getting Business Credit with Bad Personal Credit

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Author: Trent Lee

Article source: http://www.articledeshboard.com/. Used with author's permission.

Most people don't have perfect credit, and if your credit is downright bad, you might be worried that you'll never be able to get credit for your business because of your low credit score.

The good news is that bad personal credit doesn't have to keep you from getting an unsecured business line of credit. There are some concrete steps you can take to establish a good reputation in the business side of your credit life.

First, you have to legally separate yourself from your business. That means giving your business a legal structure such as a corporation or limited liability company (LLC) that has a legal life outside of you.

This is important because if you're a sole proprietor, in the eyes of the law you are your business. By extension, your personal debts are the same as business debts in the eyes of potential lenders.

The right business structure won't completely negate your bad personal credit, because if you're applying for a loan (also known as cash credit) the bank will get your social security number and pull a credit report on you. Most banks won't deal with a business that has an owner with a credit score below 640.

If you have a low credit score and know you are going to be needing cash credit for your business in the future, take the time now to work on building both your personal credit rating and your business credit.

Even with less-than-stellar personal credit you can build some business credit in what's known as trade credit. A good example of trade credit is when the office supply store issues you a credit card. This line of credit can only be used with that business.

This kind of credit is fine for some businesses that don't need working capital, but many other businesses are going to need those cash credit loans at some point.

The single best thing you can do for your business credit besides setting your business up properly (that means the right business structure, a physical address, a business phone line, etc.) is getting a good handle on your personal credit as you are building up business credit.

That way when you go to a bank looking for an unsecured line of business credit, you'll have decent personal credit as well as good business credit, which is a much more favorable situation from the bank's point of view.

Trent Lee is the cofounder of Corporate Credit Concepts, a company that specializes in helping businesses get the money they need without putting personal assets at risk. Learn the nine costliest mistakes entrepreneurs make when trying to secure business credit in a free report available at www.freecorporatecredittips.com.